Opinion
Opinion By: Gregory D. Stumbo, Attorney General; James M. Ringo, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether the Cabinet for Economic Development's partial denial of the request of Bill Bartleman, a reporter for The Paducah Sun, for inspection and copying of records related to the Cabinet's financial incentives offered to the United States Enrichment Corporation (USEC) to persuade it to locate two manufacturing plants in Paducah, McCracken County, Kentucky, violated the Open Records Act. For the reasons that follow, we find that the Cabinet's partial denial of the request did not violate the Open Records Act.
By letter dated March 9, 2004, Mr. Bartleman submitted an open records request to the Cabinet, requesting to inspect the following records:
1. Records, documents, letters and other correspondence related to incentives offered to USEC Inc. to build and/or locate a demonstration plant in Paducah, Kentucky.
2. Records, documents, letters and other correspondence related to incentives offered to USEC Inc. to build and/or locate a gas centrifuge plant in Paducah, Kentucky.
3. Records, documents, letters and other correspondence related to confidentiality agreements signed with USEC Inc., including copies of the confidentiality agreements.
Catherine C. Staib, Staff Attorney, Cabinet for Economic Development, responded to Mr. Bartleman's request, advising, in relevant part:
As you know, USEC, Inc., which has a facility in Paducah, proposed locating two different projects in Paducah, the Lead Cascade plant, also known as the Demonstration Plant, and the Commercial Plant, also known as the Gas Centrifuge Plant. The process used by USEC, Inc., resulted in competing proposals from Ohio and Kentucky. In December 2002, USEC elected to site the Lead Cascade Plant in Ohio. The same decision was made by the company regarding the Commercial Plant in January 2004.
The process for each plant involved negotiations and the submittal of proposals to USEC. The proposed incentives from the Commonwealth were preliminary in nature. As is the case with incentive packages, no package becomes a final offer or decision by the Commonwealth until it receives preliminary approval from the Kentucky Economic Development Finance Authority, after application is made by the prospective business. In some instances, legislative changes may also be sought as well as approval by other agencies. In neither instance regarding USEC did the process regarding incentives reach the point of final action by the agency. In fact, USEC made its decisions before fully engaging in the application process.
The Cabinet for Economic Development prepared proposals that were submitted to USEC for each of the two projects. These proposals are, as explained above, preliminary in nature, and, in general, are protected from disclosure by KRS 61.878(1)(i) and (j) which exempt:
Additionally, the proposals and accompanying documentation contain confidential and proprietary information about the company, its operations, needs, and plans, which are exempt from disclosure under KRS 61.878(1)(c) 1 and 2[.]
?
Although the proposals taken as a whole are preliminary recommendations, there are many documents that do not, individually, fit that description and do not contain confidential or proprietary information. They, along with other documents are enclosed.
The confidentiality agreement that you requested is a final action by the agency. The executed agreement and correspondence regarding it are also enclosed.
?
The documents enclosed with this response number 240. Please forward your check made payable to the Kentucky State Treasurer in the amount of $ 24.00 to me for processing.
As a result of the Cabinet's partial denial of the request, Mark C. Whitlow, Attorney, initiated the instant appeal on behalf of Bill Bartleman and The Paducah Sun. In his letter of appeal, Mr. Whitlow stated that the complainants did not desire to inspect or copy any material which is solely proprietary to USEC and recognized this material's exemption from disclosure under KRS 61.878(1)(c). However, he challenged the Cabinet's withholding of records relating to incentives, financial or otherwise offered to USEC under authority of KRS 61.878(1)(i) and (j), arguing that "[w]hen negotiations cease irrevocably, such offers or recommendations are no longer preliminary and should be open for inspection and review by Kentucky residents."
After receipt of notification of the appeal and a copy of the letter of appeal, Ms. Staib provided this office with a response to the issues raised in the appeal. Expanding on the Cabinet's initial response, Ms. Staib explained:
For the sake of brevity, those documents still sought by the paper may be divided into two classes: the proposal correspondence with the company and those documents that were used to arrive at the different proposals. The various proposal correspondence with the company at no time was notice of a "final" agency decision. The negotiations regarding the proposals were ongoing. The documents used to arrive at the proposals were all preliminary notes, memoranda, recommendations, data analyses, employee opinions, and the like.
In reviewing this matter, it is important to understand the process that is used to induce businesses to locate in the Commonwealth. In this instance there were extensive negotiations and the Cabinet made a variety of proposals to USEC. At the same time, a similar process was conducted between the company and Ohio officials. In fact, it can not accurately be said that there was a "final" proposal made by Kentucky on either of the projects.
As is the case with all incentive packages, no proposal becomes a final decision by the Commonwealth [until] the prospective business files a formal application and it receives preliminary approval from the Kentucky Economic Development Finance Authority (KEDFA). If there is a training assistance component, a training grant or tax credit application may require approval by the Bluegrass State Skills Corporation Board. (USEC did not file applications for any of the incentive programs.) In some instances, legislative changes may also be necessary as well as approval by other agencies, including federal agencies, and by local governments. Negotiations between a company and the Commonwealth are not complete, and do not accurately reflect the "size and scope of financial incentives, funded with taxpayer dollars, until agreements are signed and approval by the appropriate board is had. Anything up to that point is subject to change and is preliminary.
?
. . . The competition between the states in this arena is fierce. Disclosure of what Kentucky might have offered USEC, gives other competing states information about the resources available to Kentucky in similar circumstances. If problems arise in the agreement between Ohio and USEC, it would give Ohio additional information to use in further negotiations. [There can be many a slip between an announcement and a final, binding agreement between the company and a state.] It would put the Commonwealth at a disadvantage in attempting to find other entities to take over the USEC facility in Paducah when it closes, as any such business would want at least what USEC might have gotten, if not more. . . .
When a company and KEDFA reach an agreement about incentives, reducing that agreement to writing, the decision becomes final and the public has every right to know what financial incentives are involved. Those records are routinely produced to all who make the request. It is the agreement that tells the public what tax money has been pledged to induce business to the state. Preliminary offers and proposals are just that, preliminary, and are rationally protected from production by KRS 61.878(1)(i) and (j).
We are asked whether the Cabinet properly relied upon KRS 61.878(1)(i) and (j) in partially denying the request for records related to the Cabinet's proposals and financial incentives offered to the USEC. For the reasons that follow and based upon the reasoning set forth by the Courts and prior decisions of this office, we conclude that the Cabinet's actions were consistent with the Open Records Act.
The Courts and this office have long recognized that public records that are preliminary in nature forfeit their exempt status only after they are adopted by the agency as part of its final action. 00-ORD-139;
City of Louisville v. Courier-Journal and Louisville Times, Ky. App., 637 S.W.2d 2d 658 (1982);
Kentucky State Board of Medical Licensure v. Courier-Journal and Louisville Times Co., Ky. App., 663 S.W.2d 953 (1983);
University of Kentucky v. Courier-Journal and Louisville Times Co., Ky., 830 S.W.2d 373 (1992).
Moreover, the Courts have recognized that with respect to certain records the General Assembly has determined the need for governmental confidentiality. In
Beckham v. Board of Education of Jefferson County, Ky., 873 S.W.2d 575, 577-578, (1994), the Kentucky Supreme Court stated:
[d]espite its manifest intention to enact a disclosure statute, the General Assembly determined that certain public records should be excluded from disclosure. Among such records are ? "Preliminary drafts, notes, correspondence with private individuals, other than correspondence which is intended to give notice of final action of a public agency; " and "Preliminary recommendations, and preliminary memoranda in which opinions are expressed or policies formulated are recommended." KRS 61.878(1)[(i)-(j)]. From these exclusions we must conclude that with respect to certain records, the General Assembly has determined that the public's right to know is subservient to . . . the need for governmental confidentiality.
See, also,
Courier-Journal and Louisville Times Co. v. Jones, Ky.App. 895 S.W.2d 6, 8 (1995) (recognizing that "the concept of governmental confidentiality has not been totally diluted by the Open Records Act) .
This office, in 04-ORD-030, at p.8, in discussing the application of the case law quoted above and KRS 61.878(1)(i) and (j) to preliminary documents, stated:
Guided by these principles, as well as an evolving body of case law, the Attorney General has long recognized that public records that are preliminary in nature forfeit their exempt status only after they are finalized or adopted by the agency as part of its final action. City of Louisville v. Courier-Journal and Louisville Times, Ky.App., 637 S.W.2d 658 (1982); Kentucky State Board of Medical Licensure v. Courier-Journal and Louisville Times Co., Ky.App., 663 S.W.2d 953 (1983); University of Kentucky v. Courier-Journal and Louisville Times Co., Ky., 830 S.W.2d 373 (1992). In an evergrowing body of open records decisions, the Attorney General has demonstrated a commitment to implementing the intent of the General Assembly in enacting KRS 61.878(1)(i) and (j), and the courts in interpreting these exemptions. Thus, in an early open records decision, this office opined:
OAG 78-626, p. 2. In a similar vein, we observed:
OAG 78-816, p. 2.
Prior decisions of this office support the Cabinet's denial of the request for inspection of records relating to the proposals and financial incentives offered to USEC. In OAG 91-21, this office was asked to determine whether the City of Owensboro and Daviess County properly denied a request for, among other things, "the final incentive package" offered to Scott Paper Company and any "final or preliminary communications between [the City and County] and any official of Scott Paper Company." We held that the City and County had properly relied on KRS 61.878(1)[i] and [j] in withholding access to those records. At p. 5 of OAG 91-21, we stated:
It is our understanding that the extent of the action taken in this matter by the City of Owensboro and Daviess County has been to issue a Letter of Intent to Scott Paper Company. The Letter of Intent is not final agency action, because the "incentive package" is subject to negotiation and change until such time as final agreement is reached among the parties. Therefore, the Letter of Intent is a preliminary document that may be withheld from inspection pursuant to KRS 61.878(1)[i] and [j]. At this time, there is no "final incentive package" for the City of Owensboro and Daviess County because no final agency action has been taken in this matter. Accordingly, the City of Owensboro and Daviess County were justified in withholding this document pursuant to KRS 61.878(1)[i] and [j].
See, also, OAG 79-326 (holding that proposals and counterproposals submitted in negotiating process may be withheld pursuant to KRS 61.878(1)(i) and (j)); OAG 87-21 (holding that records involved with an ongoing competitive negotiation process are preliminary pending final resolution of the matter); 97-ORD-62 (holding that records generated in the course of negotiations and disclosing the substance of those negotiations may be withheld pursuant to KRS 61.878(1)(i) and (j) since "premature disclosure of records reflecting the negotiations . . . could seriously compromise the project [and] nondisclosure of those records prior to the finalization of the agreement promotes the purposes for which KRS 61.878(1)(i) [and] (j) . . . were enacted . . .").
All these decisions support the Cabinet's position that the records relating to its proposals, financial incentives, and negotiations with USEC are preliminary in nature and were properly withheld under KRS 61.878(1)(i) and (j), as no final agency action was taken. The proposals and incentives offered remain preliminary and inchoate as they were never accepted and no final agreement reached. Moreover, the Cabinet explained the need for confidentiality of these preliminary documents as competition with other States in the arena of economic development is fierce and to disclose what proposals and incentives Kentucky might have offered USEC might provide information to competing States and possibly put the Commonwealth at a disadvantage by providing information as to the resources available to Kentucky in similar circumstances and in negotiations with other entities to take over the USEC facility in Paducah when it closes. As the Cabinet explained, "the process of attracting business and industry to the Commonwealth is not complete until an agreement is reached and approved."
Under these facts and circumstances, we conclude that the Cabinet properly relied upon KRS 61.878(1)(i) and (j) in denying the request for records related to the Cabinet's financial incentives and proposals offered to the USEC and adequately explained the need for governmental confidentiality with respect to the records at issue in this appeal.
Mr. Whitlow cites
Driggers v. Palmer, et al., Ky. App., 60 S.W.3d 591 (2001), as supporting his position that "[when] negotiations cease irrevocably, such offers or recommendations are no longer preliminary and should be open for inspection and review by Kentucky residents." Driggers is distinguishable on its fact and inapposite to the issues in this appeal. In that case, the Owensboro Messenger-Inquirer made an open records request for a copy of the complaint that led to a disciplinary hearing against a police officer. On the second day of the hearing, the officer resigned. On appeal, Diggers argued, inter alia, that because he had resigned, the City Commission never took any final action on the merits of the charge against him, and thus, the complaint was exempt from disclosure as a preliminary record under KRS 61.878(1)(i) and (j). Adopting as persuasive the reasoning in 00-ORD-107, the Court held that the resignation from a position by an employee before the Commission reached a decision on the disciplinary proceeding constituted a "final action, " and that the complaint could not be withheld from inspection under KRS 61.878(1)(i) and (j), as a preliminary document. In the instant appeal, no final action was taken. Moreover, we find no authority for extending the analysis in Driggers to the facts of the instant appeal.
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceedings.